Fixing an Unbalanced Practice

On the surface, it would seem like creating the best outcomes for clients and building the business you’ve always wanted are closely related pursuits, with one feeding off the other. And in some ways, that may be true.

However, it’s not at all uncommon to see an advisor delight clients by providing excellent service but fall short of their business objectives, making them feel like they are spinning their wheels. Anyone who has a demanding job likely has felt like this at one time or another, but if it happens for too long, it can lead to burn out. In our industry, that puts a strain on relationships with clients and staff over the long run.

If you feel like you are not both pleasing clients and creating a rewarding workplace experience for you and your employees, your practice is unbalanced. To change that, here’s a three-step process worth considering:

1. Get a Business Coach—Business coaches can enhance an advisory practice in much the same way that an advisor can improve a client’s finances. Many advisors hesitate to go this route, believing that it’s equal parts unnecessary and expensive. Others may be intimidated or resentful by the prospect of having to take direction from someone else.

However, just as prospects become clients only when they accept that they need advice from an outside expert, most advisors will seek out a business coach only after recognizing the need for an objective perspective to root out potential inefficiencies in their business.

My personal experience is that business coaches can keep advisors accountable. It is nearly impossible for anyone to reach their maximum potential without having someone there to push them. Perhaps the area where a business coach can make the most profound difference: priority management. Spending your work hours on the most productive tasks, for your most productive clients, has the potential to transform how you do business.

2. Identify the Ideal Client Profile—After working with a business coach, I quickly realized I had a “Franken-business,” with various best practices cobbled together without much thought to how – or if – they complemented one another or what I was trying to build. As a result, there was a lack of alignment between what I was doing and the result I wanted. Performing a thorough review of my client relationships helped address this.

Ask yourself a few simple questions: Which clients are the most fun? Which are the most profitable? And which ones are both? From there, review the demographics, profession and hobbies of each client, while examining their beliefs and passions, their outlook on life, even how they approach relationships and goals. Using all this information together will give you a good sense of your ideal client profile.

After doing this exercise, I discovered that my ideal client was first-generation wealth with an advanced degree. Interestingly, a large percentage also enjoyed riding bicycles, skiing and scuba diving. On the surface, this may seem like trivial information to have, but knowing a client’s hobbies and pastimes typically provide a window into their level of education, how they view money, their preferred mode of communication, as well as their attitudes towards health and fitness, and even the environment.

3. Improve Your Pareto Number—The Pareto Principle, also known as the 80/20 Rule, suggests that 20 percent of your clients produce 80 percent of your income. In my case that ratio was even more skewed: 11 percent of the clients were responsible for 91 percent of the profits. So, with the help of my business coach, I set out to improve my Pareto number, selling a significant portion of my book of business and investing more in resources that would make my team successful.

To determine your Pareto number, rank your clients in descending order by revenue and then bunch them into five proportional groups. The lead group is your top 20 percent. Doing this may not only help to better determine your ideal client profile but it will also make other business decisions much simpler as well.

My strategy centered on building deeper relationships with the people I believed I was best equipped to serve. As part of this, I focused on upgrading our technology and providing my staff with more training. The result was a higher level of satisfaction among my core client base, which ultimately led to new clients who fit my ideal profile—and more revenue.

This process was not easy, but it was successful, and I am confident many other advisors can do the same and prosper.

If the path seems daunting, turn to your business coach for reassurance, motivation and direction. The advisory business is better for you, your team and your clients when you shed distractions, get focused and create more direct correlation between client satisfaction and business success for yourself.

Greg Luken

To view the original article featured in Financial Advisor Magazine click here.